S&P ups Nextel outlook to stable

Standard & Poor's revised its rating outlook for Nextel Communications Inc. to stable from negative based on solid operating performance and lower financial leverage.

S&P affirmed Nextel's ratings, including senior unsecured debt at B and preferreds at CCC+.

Despite the weak economy in 2002, Nextel grew revenues by 24% and generated about $122 million in free cash flow, S&P noted. Debt-to-annual EBITDA leverage dropped substantially to about 3.9x at the end of 2002 from about 7.8x at the end of 2001.

Liquidity is adequate at least through 2005, with about $2.7 billion in cash equivalents and about $1.4 billion in availability under its bank credit facility at the end of 2002, S&P said.

By effectively targeting a market niche and offering a highly differentiated service, Nextel is likely to maintain good operating metrics and further improve its financial risk profile.

However, the degree of improvement could be constrained by factors such as wireless number portability, intense competition and technology risks, S&P said.

Moody's ups RCN liquidity rating

Moody's raised the speculative grade liquidity rating for RCN Corp. to SGL-3 from SGL-4, reflecting a liquidity profile is now best characterized as adequate and no longer weak.

The revision follows the recent sale of cable television system assets for proceeds of about $245 million and Moody's analyses that RCN is no longer expected to experience a liquidity shortfall over the next year.

Moody's noted, however, that financial maintenance covenants in RCN's senior secured bank credit agreement continue to be notably tight and that the minimum consolidated EBITDA test scheduled to be applicable again starting in 2004 may prove challenging without a transition to positive cash flow.

The company has moved toward generating positive EBITDA, and Moody's believes it may be possible at some level in 2003.

Fitch cuts Fiat to junk

Fitch Ratings downgraded Fiat SpA to junk including cutting its senior unsecured debt to BB+ from BBB-. The outlook remains negative.

Fitch said it lowered Fiat because it is concerned the creditworthiness of the company's future core operations is no longer consistent with an investment-grade credit profile.

Fiat announced on Feb. 28 its intention to dispose of its two best performing operations, Fiat Avio and Toro Insurance to reduce indebtedness.

Fitch said it views the announcement, alongside the appointment of a new CEO and chairman, as reflecting a change in strategy.

The downgrade also takes into account Fiat Auto's lower than expected profit generation for fiscal 2002, Fitch said. Fitch expects the European auto market to decline by 2% in fiscal 2003 due to the weaker economic environment, which will increase competitive pressure.

Fitch acknowledges that the announced transactions aim at supporting the Fiat Auto restructuring plan and at achieving a sounder credit profile at the other group businesses. However, the disposal of the profitable Fiat Avio and Toro result in a weaker underlying profit mix, as the group retains its interest in the underperforming Comau (production systems), Teksid (metallurgy products) and Magneti Marelli (components) operations. These activities will remain exposed to cyclical markets, which are undergoing structural changes and consolidation.

S&P confirms CenterPoint, off watch

Standard & Poor's confirmed CenterPoint Energy Inc. including its senior unsecured debt at BBB-, subordinated debt at BBB- and preferred stock at BB+, CenterPoint Energy Houston Electric LLC's senior secured debt at BBB and CenterPoint Energy Resources Corp.'s senior unsecured debt at BBB, subordinated debt at BBB- and preferred stock at BB+, removed it from CreditWatch with negative implications and assigned a stable outlook.

S&P said the confirmation reflects CenterPoint's successful negotiation of an amendment to its existing $3.85 billion credit facility. Importantly, the amendment extends the loan maturity to June 2005 from October 2003 and eliminates $1.2 billion in mandatory prepayments that would have been required this year; the first $600 million had been scheduled on Feb. 28.

As a consequence, the overhang of substantial refinancing risk has been eliminated, S&P said.

CenterPoint has a low business risk profile. Texas electric operations are supported by a very supportive regulatory environment, lack of an electricity supply function/commodity risk, and continued moderate growth in its service territory, S&P noted. These factors are mitigated by volume volatility due to weather. Gas operations are diversified and purchased gas adjustment clauses in all six jurisdictions mitigate commodity risk.

Consolidated debt will remain high until 2004/2005, when the Texas generation assets are sold, and proceeds are received from the securitization of stranded costs associated with the generation assets, S&P said.

The rating agency added that the stable outlook indicates that CenterPoint will maintain its current rating over the medium term despite positive trends and interim challenges.

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